It’s no secret that post-secondary education is expensive. According to Statistics Canada, full-time undergrad tuition averaged a whopping $6,693 for the 2021-2022 school year. And you can expect that number to rise over the coming years. This doesn’t even include expenses like books, clothing, housing, food and transportation. And the expenses don’t always stop when your child earns a degree or diploma. They may pursue a graduate degree or professional program like law, medicine, or teaching.
You may be wondering if you’ll have enough money to help pay your kids’ way through post-secondary school. Yes, student loans are an option. But, they could become a financial burden your kids will have to carry for years. So where else can you turn?
Do you have close relationships with friends and relatives who are invested in your child’s future? If so, there’s ways they can help.
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How can you fund your child’s education?
Your friends and relatives may give your kids money on their birthdays. Or perhaps your parents plan to leave their grandkids an inheritance. "These financial gifts provide opportunities to talk to your family about your child’s education savings. And, more importantly, how they can help,” says Blake Griffith, BAFS, CFP, Sun Life advisor. “It’s also a great way to educate them about registered educations savings plans (RESPs).”
Want to learn more about RESPs?
It’s a good idea to let your family and friends know about you child’s RESP early. Why? Because they can contribute to it whenever they want. But they can’t do that if they don’t know it exists.
Griffith advises, “When you’re discussing RESPs with your family and friends, you can tell them how they work. And more importantly how their money can help. You can talk about what kind of colleges or career choices could be available to your kids. This way your loved ones will feel more connected to your goal.”
Do you want to help your loved ones quickly understand what an RESP is? Consider sharing this video with them: Simply Put: What is an RESP? In under 2 minutes, they can see how RESPs work.
Can friends and family contribute to RESPs?
Yes, they can. And Griffith recommends two options to collect their contributions:
1. Collect money directly and put it in a family RESP
The benefit of a family RESP is that you have one plan for multiple children, explains Griffith. So, if one child doesn’t pursue post-secondary education, the other kid(s) could still use the money. Having everything in one, consolidated plan also makes it easier for you to keep track of all the contributions.
Will all your children be eligible for grants under one RESP? “Yes, the government bases the Canada Education Savings Grants (CESGs) on how many beneficiaries exist within a plan. It’s not based on how many plans there are for a beneficiary,” Griffith clarifies. To add children to an existing family RESP:
- they must be under age 21, and
- step-parents must have adopted their stepchildren.
“The crowdfunding concept doesn’t have to be high-tech or require the latest digital tools,” Griffith says. “For special occasions like birthdays and holidays, family and friends can give cash, cheques or e-transfers directly to you. Then, you can deposit it into a family RESP. It’s as simple as that.”
2. Relatives of friends can set up individual RESPs
If anyone wants to contribute regularly, they can set up an individual RESP for the child. “This allows them to give directly to the RESP without having to go through you each time,” Griffith says. He urges caution with this approach, however.
“With individual RESPs, everyone contributing should always co-ordinate with the parents about how much you’re contributing,” Griffith says. Why? The lifetime contribution limit of $50,000 per child/beneficiary applies to the total of all plans. “If you have multiple plans for the same child, people may end up over-contributing. This can cause an over-contribution penalty without even realizing it.”
What are the best times to crowdfund for an RESP?
Griffith suggests asking for contributions during times where people are likely to give gifts.
- Birthday parties. Add a note to birthday invitations that if guests would like to give a gift, they can add to your child’s RESP.
- Baby showers. If it’s not a surprise, ask the host to suggest that guests consider contributing to your child’s education. After your baby is born, you can deposit the money received into an RESP. Note that you can’t set up an RESP until your child has a social insurance number (SIN). You can apply for a SIN as soon as the child has a name.
- Holidays. Ahead of the festive season, you could send a family email suggesting that cash gifts will go into your kids’ tuition fund. Or, if someone asks for gift recommendations, that’s a great opportunity to bring up the RESP.
- Graduations. What better way to celebrate this milestone than by investing in their academic future. CESGs are available for kids up until December 31 of the year the child turns 17. However, a child is eligible for the grant at age 16 and 17 if you save in an RESP before they turn 15.
You might feel a little funny about asking. But your family and friends will love knowing that their money is going to a good cause.
How can you encourage family who hesitates giving to RESPs?
Some grandparents or relatives might think RESP contributions are a “boring” gift. Of course, there’s something magical about seeing a child eagerly open a new toy. Compared to toys that break and clothes they outgrow, RESP contributions make a more useful and lasting gift.
In this case, you can suggest they give your child an inexpensive gift AND an RESP contribution. That way, they get to experience the joy of seeing the child’s reaction. And, they can feel good about contributing to their education and future.
How can you get started?
Talk to your advisor or find a Sun Life advisor to get your child’s RESP savings started.
- Can you use an RESP for an apprenticeship?
- RESPs: What happens if your child doesn’t go to university?
- 5 smart ways to save for your child’s education
This article is meant to only provide general information. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.